Well, the overall opinion seems to be that the Henry Tax Review was largely a missed opportunity — hardly the grand reform of our taxation system which had been promised. None the less, some of the changes announced yesterday will undoubtedly impact businesses and their hiring practices, and I expect that small business may feel the pinch more readily than larger organisations. So what impact, if any, will the changes announced have on your business and its hiring decisions?
The key change announced which will most broadly effect businesses and their hiring decisions is the change in the Superannuation Guarantee Contribution; rising from the current level of 9% to 12%. Ironically, this was not at all part of Henry’s 138 recommendations. At 3%, this is a big increase in compulsory superannuation contributions to be made by employers into their employees’ nominated superannuation funds. Admittedly this will not all impact us in one hit, taking until 2020 to fully take effect, however it will be something that employers will need to think about, and budget for in the coming years. Let’s face it, most of us would agree that this is great for employees; it will help to fund their retirement down the track and presumably, as it is designed to, reduce the pressure on Governments to fund pensions and support our aging population. But at the other end of the spectrum are the business owners who have to pay for it. Whilst it will be a cost which is absorbed and over time will go unnoticed, in the next 10 years while the changes filter through, it will undoubtedly affect wage levels and the potential for wage increases during this time. Having discussed this impact this morning with colleagues, staff members and associates, there is a large percentage of employees, particularly those who are only early in their careers, who feel almost ‘cheated’ by these changes. They understand that the value of their overall remuneration package will be increasing, but for those battling to get on the property ladder, and work to improve their financial security through means other than superannuation, if they are going to be gifted a 3% increase they would much rather have this in terms of wages. Most importantly, it is the fact that a ‘forced’ hike in their super funds will impact on their ability to negotiate any increase in their wage rates, because employers may simply not have the funds for both.
This will not all impact us in one hit, taking until 2020 to fully take effect, however it will be something that employers will need to think about, and budget for in the coming years.
Whilst I am far from an expert on taxation and related matters, it certainly appears that some of the recommendations made in the Henry Review had the opportunity to encourage employment growth in all sectors, and overall make things simpler for employees. Whether these changes will be picked up and tackled in the future remains to be seen, but it’s fair to say that to date the changes announced are somewhat underwhelming and certainly will not go far enough to encourage employment growth, particularly amongst smaller businesses.
